CA L I F O R N I A AVO CA D O C O M M I S S I O N

2 0 1 3 - 2 0 1 4 A N N U A L R E P O R T

Table of Contents

Mission Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Chairman’s Introduction and Board of Directors List . . . . . . . . . . . . . . . . . . . . . . . 3

President’s Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Vision 2025 Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2013-14 Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Basic Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Independent Auditor’s Report on Compliance . . . . . . . . . . . . . . . . . . . . . . . 41

Industry Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

M I S S I O N S T A T E M E N T

To maximize grower returns by enhancing

premium brand positioning for California Avocados

and improving grower sustainability .

— 2

Ed McFaddenCAC Commissioner – District 3, Chairman 2013-14

Chairman’s Introduction

It is again my pleasure to introduce the 2013-14

California Avocado Commission (CAC) Annual

Report . As we California growers all know, the

past year was like no other, full of unprecedented

challenges from start to finish as we faced the

third year of drought, escalating water prices and

enormous increases in imported fruit . Polyphagous

shot hole borer (PSHB), perhaps the most

potentially dangerous pest/disease complex ever

faced by our industry, began spreading rapidly

into commercial groves in the southern growing

regions . In spite of these challenges, I am excited

to see the results of the Commission’s efforts in

our marketplace and groves . I am guardedly

optimistic as we move forward into our season .

Please take a few minutes to read through

CAC’s Annual Report and the following state

of the industry highlights prepared by your

Commission staff .

— 3

Tom BellamorePresident, California Avocado Commission

President’s Letter

As members of the agricultural industry, we

all engage in some form of accounting . While

most of that accounting comes down to numbers,

it often revolves around the challenges we face

year-in and year-out — pests, weather, costs

and competition, which

ultimately affect the bottom line .

Without a doubt, this past year

has presented us with plenty

of events that led to entries in

red ink . We labored through the

worst drought California has

experienced in a hundred years .

For the first time ever, the PSHB

made its way to commercial

California avocado groves . And

during the 4th of July promotional

period an influx of avocados

from other nations depressed prices and

flooded the market, right in the heart of the

California season .

But that is only one side of the ledger .

This year will be remembered for the successful

launch of the California avocado labeling

initiative — an exceptional leap forward . Thanks to

years of Commission-funded consumer research

studies, the support of California growers, the

collaboration of handlers and the increasing

desire of consumers to know where and how their

food is grown, we have gathered the momentum

(and data) necessary to ensure California

avocados are clearly identified at the point of

purchase . And we have done so at a time when

it is needed most . As global imports increase,

the Commission has succeeded in making our

marketing and promotion dollars work harder

for us because we have linked CAC’s premium

messaging with the product at point of purchase .

And then there is the backstory for the

challenges faced this year . Our Vision 2025

mission has played a critical role

in guiding our response to these

challenges by influencing long-

term strategies, key decisions,

Commission-funded research,

relationship-building and prudent

allocation of crucial resources .

We understand very well that our

successes this year are a direct

result of continuous, quality, long-

term planning and preparation .

While we will never be able to control the amount

of precipitation we receive, we have energized

our research effort to focus on providing salinity-

— 4

“...we have gathered the momentum

(and data) necessary to ensure California avocados are clearly

identified at the point of purchase.”

tolerant rootstocks to overcome poor water

quality . And when we advocate for equitable

water pricing and water purchase agreements

on behalf of our growers, our voices are joined

with and strengthened by those of new and

established agricultural partners .

Thanks to sound judgment, we proactively

invested more than $1 million in PSHB research

since 2012 — as soon as the potential threat

was identified . And this year we connected

and partnered with some of the world’s leading

ambrosia beetle experts to identify gaps in

knowledge, determine promising research areas

and identify next steps in eradicating this threat .

While global competition is both a present

and future concern, the years we have spent

establishing the California avocado premium

positioning have resulted in current-year

marketing successes that range from nationwide

fast casual restaurant promotions, to industry

awards and millions of digital impressions . As for

the future? Our perseverance is sure to pay off .

While this year we celebrate the successful launch

of the California avocado labeling initiative, in the

years to come we will reflect on this moment as

just one of many successful steps on the path to

our Vision 2025 .

So as we look back at this year, we also look

forward . Together, with determination and resolve,

we will continue to build a strong market for

California avocados and improve the productivity

and profitability of our growers . Like the challenges

we face, this will happen year-in and year-out as

we make both small steps and giant leaps forward,

all with the aim of increasing value and improving

grower productivity .

V I S I O N 2 0 2 5 S T A T E M E N T

California avocados are highly sought after by discriminating consumers who appreciate the fruit’s freshness, exceptional taste, consistently superior quality, and healthfulness .

These consumers look forward to the California avocado season and understand that supplies may be limited . Consequently, they are willing to pay a price commensurate with the premium attributes of the product, and to choose California avocados over those from all other origins .

California avocado growers are highly productive, profitable, and well organized . Their production practices focus on providing

the highest quality product possible to a discerning market .

— 5

2013-14 Year in ReviewDespite a year of very tough challenges —

severe drought and the emergence of the

polyphagous shot hole borer beetle in a major

avocado growing region — this also has been

a year marked by remarkable success: the

California avocado labeling initiative .

California Avocado Labels — No Time Like the Present

Having conducted online surveys, consumer

research focus groups and in-store testing to

develop California label concepts during the

previous year, in February 2014 the Commission

completed online creative testing of multiple

label concepts to determine the preferred

color scheme . Four-color labels were the clear

favorite with our target consumer . The Commission

marketing team discussed

its findings with the

Marketing Advisory

Committee and CAC

Board of Directors, and

then met with individual

handlers to discuss

implementation of the

labeling program .

The strong collaboration

between the handlers,

growers and the

Commission to produce

a family of customized

California avocado

labels is significant in an

era in which more consumers are interested

in purchasing U .S .-grown avocados and are

increasingly checking

the labels of their

produce .

The importance of

launching the labeling

initiative at this particular

time in our history

cannot be overstated —

as global imports continue to flood the U .S . market,

it has become critical to differentiate premium

California avocados for consumers at the point of

purchase . Take, for example, this year’s 4th of July

holiday . Fueled by the Commission’s 4th of July

marketing campaign, the holiday became the

highest avocado consumption event on record at

109 .3 million pounds and California avocados held

their premium position with

a positive price differential .

That said, the volume and

timing of aggressively-priced

avocado imports resulted

in depressed pricing during

the holiday . While the

Commission is pleased with

the ongoing growth and

success of CAC’s American

Summer Holidays programs

and initiatives, this example

highlights the importance

of ensuring premium

California avocados are

clearly identified at the point

of purchase . Bovitz, Inc. 2014 Avocado Tracking Study

— 6

Tom Bellamore and Charley

Wolk collaborated with A.G.

Kawamura and members of

other California agricultural

groups such as the California

Cut Flower Commission,

California Strawberry

Commission, Irvine Valencia

Growers, Orange County Farm

Bureau, San Diego County Farm

Bureau and Western Growers

to advocate on behalf of the

ag industry at MWD sessions.

In light of the drought and

reduced groundwater

availability, some

California avocado

growers in San Luis Obispo

County were forced to

stump their trees in an

effort to preserve their

groves.

a coalition of agricultural

organizations, including

Western Growers, California

Citrus Mutual, California Cut

Flower Commission, and

others . In early July, led by

Tom Bellamore and Charley

Wolk, representatives of the

coalition, including A .G .

Kawamura, former California

secretary of agriculture, made an appeal before

MWD’s executive committee and board for the

creation of a Working Group to explore means of

slowing down the escalating costs of agricultural

water . While the formal request was denied, Randy

Record, MWD Chairman, did commit to facilitating

ongoing meetings with agricultural representatives

to further the discussion .

A decided win for California avocado growers

was the Commission’s successful efforts to extend

the Transitional Special Agricultural Water Rate

(TSAWR) with the San Diego County Water

Authority (SDCWA) . The extension will provide

a continued savings of $283 per acre foot for

agricultural rate payers through January 2016 .

Because of the collaborative California avocado

labeling initiative, consumers can now easily

identify premium California avocados when

on display . However the journey has just begun;

going forward, the California avocado labeling

initiative will play a critical role in the Commission’s

long-term vision to differentiate our fruit for

freshness, exceptional taste, superior quality and

healthfulness .

Advocacy and Research Critical to Long-term Drought Management

The Commission’s industry affairs program

has a long history of advocating on behalf of

California avocado growers concerning water

availability and pricing, but efforts intensified

this year as Californians

suffered through one of the

worst droughts on record .

Throughout the year, CAC

routinely met with members

of the Metropolitan Water

District (MWD) to raise awareness concerning

the importance of the avocado industry and the

challenges faced by growers under the current

conditions . The Commission successfully organized

— 7

Photo taken during UCR researcher visit to an

agricultural school in Ngoc Lac. Back row (L to

R) Paul Rugman-Jones (Entomology, UCR), Tim

Thibault (Huntington Library and Gardens), Dr.

Richard Stouthamer (Entomology, UCR). Front

row (L to R) Dr. Quan (Vietnamese Academy of

Forest Sciences), Dr. Thu (Vietnamese Academy

of Forest Sciences), Dr. Akif Eskalen (Plant

Pathology and Microbiology, UCR).

In addition, the Commission partnered with the

Escondido Growers for Agriculture Preservation

to develop a reclaimed water treatment and

delivery system . As part of this program, Dr . David

Crowley started a research project comparing

the effects of using reclaimed water and potable

water on avocado trees .

Proactive Research, Collaboration and Outreach — Building Blocks for Addressing PSHB Threat

In December 2013 the polyphagous shot hole

borer was identified on a golf course in El Cajon;

by September 2014 the first-ever PSHB find in a

commercial California avocado grove had been

confirmed . These reports, while alarming, were

not unexpected . In fact, the Commission has long

prepared for the PSHB threat by funneling more

than $1 million into PSHB and fusarium dieback

(FD) research and establishing relationships with

PSHB experts . Those steps provided us with critical

advantages this year .

In 2014 the Commission claimed a leadership role

by garnering support from outside agencies and

gathering independent experts to pool resources

and conduct research designed to lead to a

promising means of coping with the PSHB beetle .

Having determined that the California PSHB

beetle most likely originated from Vietnam, the

Commission funded a three-week trip to Vietnam

for University of California (UCR) researchers . There,

Dr . Richard Stouthamer, UCR, Dr . Akif Eskalen, UCR

and their team collected samples, examined the

fusarium dieback fungi and researched potential

PSHB predators .

In anticipation of a potential chemical solution

to the pest-disease complex, Ken Melban, CAC

director issues management, and Dr . Joe Morse,

UCR met with chemical manufacturers and the

California Department of Pesticide Regulation

concerning the registration of materials . And in

October 2014 the Commission launched its first set

of field chemical trials .

A key component to eliminating the PSHB threat

is awareness and outreach — the more people

are made aware of the threat, are able to identify

the pest and signs of infestation, and refrain

from moving infected materials, the higher the

likelihood that the California avocado industry

can limit the distribution of PSHB . As part of this

initiative, the Commission advocated before the

United States Department of Agriculture’s Animal

— 8

CDFA Secretary Karen

Ross made PSHB the

focus of a multi-agency

Summit. Photo courtesy

of California Department

of Food and Agriculture .

Traffic generated by The Scoop blog contributed to a record year for

the website — over 1.5 million visits were recorded this year.

In CAC’s targeted ad markets, the recently identified “mega” user buys

more than 210 avocados per year and accounts for 15 percent of

avocado users. Bovitz, Inc . 2014 Avocado Tracking Study

Skyrocketing Consumer Engagement with the California Avocado Brand

The overall trend toward higher avocado

consumption continued this year, evidenced by

diverse usage as well as a high percentage of

heavy, super and mega users .

As the consumption of avocados has risen,

so has consumer engagement with the premium

California avocado brand . In particular, the

Commission’s newly launched blog —

The Scoop — demonstrated the ability to garner

the attention of avocado lovers . The blog

reported more than 15,000 unique visits per month

during the season — greatly exceeding the goal

of 2,000 — and its viewership led to a banner year

for website traffic, increasing visits by more than

100,000 since 2013 .

and Plant Health

Inspection Service for

PSHB funding and CAC

President Tom Bellamore

met with California

Department of Food

and Agriculture (CDFA)

Secretary Karen Ross

to develop a statewide

PSHB task force .

The Commission also conducted

outreach and educational

programs to encourage

California avocado growers and members of

the agricultural community to be vigilant about

monitoring their groves . A series of articles

concerning PSHB / FD updates and best practices

were published on the grower website as well as

distributed via email throughout the year, and the

informational grower meeting held in Escondido

in September was well attended . CAC also

partnered with the California Association of Pest

Control Advisers to provide pest control adviser

training on PSHB and FD .

— 9

Bloggers, SRDs,

foodservice operators

and members of trade

media joined CAC on a

behind-the-scenes tour

of an avocado grove

and packinghouse to

learn more about the

availability and quality

of premium California

avocados.

Social media continued to be a critical

communication vehicle for the Commission

with California avocado fans . The Commission’s

Instagram account, a channel noted for its ability

to engage the Millennial and Generation Z

audiences, was featured as one of the best 25

Instagram accounts to follow by the DailyBurn .com,

a well-regarded health and fitness blog with an

average of 450,000 visits a month .

Integrated Marketing Outreach— Spring Grove Tour

To kick off the California avocado season,

CAC’s marketing team invited guests

representing an assortment of the Commission’s

communications programs to participate in

a grove and packinghouse tour . The invitees

included bloggers, supermarket registered

dietitians (SRDs), foodservice operators and

trade media . Bringing together the participants

with different areas of expertise created

high levels of engagement with each other,

growers, packers, CAC staff and the marketing

team . During the one-day tour in Temecula,

participants had the opportunity to tour an

avocado nursery, meet California avocado

growers, enjoy a California avocado-centric

lunch, visit an avocado packinghouse and learn

about premium California avocados . The event

resulted in 115 brand-related tweets and retweets,

reaching more than 1 .2 million followers on

Twitter . Facebook and Instragram posts resulted

in another 67,000 impressions . In addition, trade

media coverage reached in excess of 225,000

circulation . This coverage promoted California

avocado availability and the unique attributes of

California-grown fruit .

CAC’s Collaboration with Retail and Foodservice Leads to In-store, In-restaurant and Digital Success

The Commission’s ability to build strong retail

relationships that help increase awareness of

and demand for California avocados

continued to be a strongpoint this year . The

5-Star Performance Program, held April 15 –

September 1, rewarded retailers for California-

avocado-centric in-store support, feature ads,

displays, digital media and creative programs .

— 10

Ralphs’ custom in-store POS (228 stores)

encouraged consumers to purchase California

avocados throughout the season.

Two hundred

Albertsons stores

promoted

California avocados

with custom signage

as part of their

75th anniversary

celebration.

Habit Burger

featured California

avocados in its

signature item, the

Double Charburger,

at 94 units and

promoted the LTO

item on its website

and social media

sites.

Across the nation,

303 Which Wich

units encouraged

diners to add fresh

California avocados

to their sandwiches

with in-store and

digital promotions.

Of the 23 participating retailers, who

merchandised California avocados in more than

2,500 stores, 15 ran a combined 70 ads with 45 ads

featuring the Hand Grown in California logo and

two featuring California avocado growers . Custom

California avocado in-store signage and frequent

mentions of the premium California avocado

brand on retailers’ social media channels rounded

out the retail successes of the year .

To encourage consumers to enjoy fresh California

avocados while dining out, CAC partnered with

a variety of foodservice operators . Foodservice

promotions included in-restaurant merchandising,

limited time only (LTO) menu items, email blasts

as well as website and social media promotions

in chains such as Baja Fresh, California Tortilla,

Denny’s, El Pollo Loco, Fuzzy’s Tacos, Habit Burger,

Just Fresh, La Salsa, RAM Restaurant & Brewery/CB

Potts, Shari’s, Subway, Togo’s and Which Wich .

— 11

Chef/Registered

Dietitian Michelle

Dudash’s food

preparation demos

attracted large

crowds at the PMA

Fresh Summit.

At the PMA Fresh Summit, CAC invited SRDs for a

tour of a California avocado grove, followed by

an avocado-centric dinner.

Exceptional Engagement with Key Industry Decision Makers at Fresh Summit

The 2014 Produce Marketing

Association (PMA) Fresh Summit

provided the opportunity for the

Commission to showcase California

avocados with industry leaders in Anaheim, CA .

Retail decision makers, SRDs and produce industry

leaders from around the globe flocked to the

Commission’s booth to enjoy freshly prepared

avocado dishes and meet with CAC’s retail

marketing directors, staff and management, as

well as California avocado growers and board

members .

CAC staff met with decision-makers from retailers

such as AmazonFresh, Fresh & Easy, Kroger,

Northwest Grocers, Sam’s Club, Save Mart, Sprouts,

Stater Bros ., Wakefern, Walmart and many more

during PMA’s Fresh Summit .

More than 20 SRDs from 14 states, plus one from

Canada, attended small-group educational

sessions and snack demos hosted in the CAC

booth and joined the Commission for a behind-

the-scenes grove tour as part of CAC’s sponsorship

of the Produce For Better Health Foundation’s SRD

program . These SRDs represented more than 7,600

stores across the nation and Canada . In addition,

50 percent of the SRDs participated in the

Commission’s Tweet to Win social media contest,

sharing photos and Tweets with their followers and

the Fresh Summit Twitter audience .

CAC Recognized for Creativity and Leadership

Once again, the efforts of our marketing team

were acknowledged by some of the most highly

respected industry publications and associations .

In September, CAC Retail Marketing Director Cece

Krumrine was honored as the first woman to win

Produce Business magazine’s 2014 New England

Produce Person of the Year . This award was swiftly

followed, in October 2014, by Produce Business

Magazine honoring CAC with its Marketing

Excellence Award . The award recognized

the Commission’s California Avocado Season

Foodservice Chain Promotion as one of the 10

best marketing campaigns of the year .

— 12

In the foreground, the Pine Tree

Ranch Demonstration Grove

sign showcases the partnership

between the Commission and

Cal Poly Pomona with new

avocado tree demonstration

grove plantings visible in the

background.

Pine Tree Demonstration Grove Plays Critical Role in Grower Outreach

Established in 2013, the Pine Tree Ranch

Demonstration Grove was designed to serve as

a hands-on arena in which California avocado

growers could learn about, witness and practice

cultural management best practices . To kick off

the 2014 growing season more than 100 growers

attended the Inaugural Field Day hosted at the

Demonstration Grove in January .

Throughout the year a series of Field Days were

held at Pine Tree Ranch covering topics designed

to help growers improve productivity and

profitability . Topics included fertilization, pruning,

persea mite/avocado thrips management,

irrigation, salinity management and new tree

planting best practices .

— 13

— 14

— 15

— 16

— 17

— 18

— 19

— 20

— 21

— 22

— 23

— 24

— 25

— 26

— 27

— 28

— 29

— 30

— 31

— 32

— 33

— 34

— 35

— 36

— 37

— 38

— 39

— 40

— 41

— 42

Industry Statistics

— 43

2 0 1 3 - 2 0 1 4 A N N U A L R E P O R T

California Avocado Commission 12 Mauchly, Suite L

Irvine, CA 92618 949 .341 .1955

CaliforniaAvocadoGrowers.com

CaliforniaAvocado.com

Become a fan at Facebook.com/CaliforniaAvocados

Follow us on Twitter.com/CA_Avocados

©2015 California Avocado Commission